Franchising regulation: OfS seeks to sharpen its approach

The Office for Students has published a significant consultation on new requirements for the oversight of subcontractual (or ‘franchise’) arrangements. The consultation proposes a new ongoing condition of registration (condition E8), which would apply to all registered providers but impose obligations in relation to certain domestic franchising arrangements (note transnational education (TNE) is excluded) and where student numbers are, or planned to be, 100 or more in any given academic year. The OfS would also have powers to bring other providers in scope where it suspects the subcontractual arrangements pose material risks to student or taxpayer interests.

The draft condition is structured around an overarching obligation to ensure that any risks to the interests of students and/or taxpayers posed by existing and future arrangements (within scope) are effectively identified and addressed. In connection with this, providers must:

1. maintain a single comprehensive source of information (“CSoI”) (a concept familiar from condition E6)
2. comply with such CSoI
3. comply with any “subcontractual arrangement direction” that might be issued by the OfS in connection with relevant arrangements

The condition sets out significant further detail in relation to each, and whilst compliance with (1) - (3) are required by the overarching obligation, the OfS stresses they aren’t an exhaustive set of requirements and it may identify a breach based on an assessment of compliance with the overarching obligation itself (even if, for example, the provider has a CSoI in place).

The potential subcontractual arrangement directions are wide ranging and include requiring a provider to change T&Cs, stop entering into new subcontractual arrangements, implement restrictions on student numbers and pay refunds to students.   

In addition to a new condition E8, the consultation also proposes changes to (a) Regulatory Advice 9 (to introduce two new disclosure requirements requiring publication of a subcontractual rationale and fee retention details) and (b) Regulatory Advice 16 (to add some specific reportable events relating to subcontractual arrangements).  

The OfS says that it plans to use its existing risk-based approach to monitoring but will consider its full range of enforcement powers if it decides there has been a breach of the condition. It specifically mentions monetary penalties, suspending aspects of a provider’s registration (including access to SLC funding), and considering eligibility for degree awarding powers amongst a number of severe potential consequences.

The consultation runs until 1 October 2025. The OfS plans to publish final decisions after considering responses in late 2025 and proposes that any new condition would take effect from early 2026. The OfS would require providers to move quickly to comply and proposes that oversight and control mechanisms are established and the CSoI developed with immediate effect and no later than four weeks after the proposed condition comes into effect. 

There is a lot in the consultation including wide-ranging implications for governing body oversight and monitoring, audit, policies and procedures and contracts. Over a series of blogs we’ll unpack some of the key issues.