Franchising under the spotlight: OfS’s proposed compliance thresholds

Continuing our coverage on the Office for Students’ consultation on new franchising requirements, we look at the proposed criteria to bring subcontractual / franchising arrangements within scope of the draft condition. Although referred to as “E8” in the consultation, we expect this numbering to change in due course following the recent OfS decision in a separate consultation process which resulted in the restructuring of its proposed initial condition E7, now implemented as initial conditions E7-9.  

There are several routes under which arrangements may fall within scope of the proposed ongoing condition. Whether an arrangement is in scope depends on whether it is a “relevant subcontractual arrangement”, combined with the question of how many students taught under such an arrangement are registered on “relevant subcontractual courses”. Some types of arrangement are excluded, as outlined below.

What is a relevant subcontractual arrangement or course?

The requirements firstly apply where a registered provider has one or more relevant subcontractual arrangements, with 100+ FTE students registered across all relevant subcontractual courses.

There are three elements to a relevant subcontractual arrangement:

1. It is an arrangement between a registered provider and one or more partner providers in relation to the provision of higher education courses;
2. Students on one or more of those courses must have (or will have) a contractual relationship with the registered provider; and
3. The registered provider’s staff or contractors must deliver 50% or less of the total course delivery hours on one or more of the courses.

A “relevant subcontractual course” is an HE course provided under a relevant subcontractual arrangement where the course itself meets the requirements in the previous two bullet points.

The OfS is particularly concerned that a number of the risks it has identified are linked to the recruitment/admissions phases of subcontractual provision. It states that the requirements it proposes will in some cases mean that registered providers will need to ensure the required control mechanisms are in place in the year before students have taken up their places. The OfS is proposing to achieve this by applying the ongoing condition requirements where the registered provider concludes (or reasonably should have concluded) that there is a “material likelihood” that the total number of students registered on its existing or future “relevant subcontractual courses” will be 100+ FTE in a given academic year. There are further detailed rules as to how this calculation is to be approached from a relevant trigger point date in relation to planned recruitment. 

The ongoing condition requirements can also apply where the OfS determines that it has reasonable grounds to suspect that a provider’s existing or future relevant subcontractual arrangements pose material risks to student or taxpayer interests.

Under the consultation, existing arrangements that meet the criteria above (and aren’t excluded) will be in scope from the date the condition comes into effect.

Exclusions

Some arrangements are excluded from the definition of relevant contractual arrangement. These include arrangements where the partner provider(s) are all within the following categories:

• state-funded schools, FE corporations, sixth form college corporations, designated institutions and providers of NHS services (the condition defines these categories in more detail), local authorities, or police and crime commissioners; or
• entities that are authorised to grant taught or research awards under an Act of Parliament or Royal Charter.

Also excluded are arrangements where the contract relates to higher education courses and all the course content is either:

• delivered in a location outside England, Scotland, Wales and Northern Ireland; or
• delivered online but where all of the students registered on the “relevant course” are ordinarily resident outside of the home nations.

Next steps

Even if a provider’s arrangements fall within the exclusions or underneath the threshold for registration, the various requirements in the regulatory framework, including those relating to governance, quality and standards and under other relevant legal frameworks like consumer law will continue to apply. The same also applies to arrangements that are currently in force, and we have seen the OfS increasing its regulatory focus in this area for some time. 

Given existing responsibilities under current regulatory and legal frameworks, many providers will already have a range of compliance mechanisms in place that are relevant to the requirements of the proposed ongoing condition. However, they will need to ensure that they are in a position to meet the specific requirements of the proposed ongoing condition which the OfS says are planned for introduction in early 2026. As mentioned in our previous coverage, the OfS states it intends requiring providers to move quickly to comply and proposes that oversight and control mechanisms are established and the comprehensive source of information developed with immediate effect and no later than four weeks after the proposed condition comes into effect.