Managing risk across franchise arrangements

Franchising has benefits for students and universities but there are risks too. Richard Scott, public sector client manager & head of education at Aon, explains how universities can manage these risks.

Franchising has many benefits for students and universities. But, without proper governance and controls in place, subcontracting the delivery of higher education presents some significant risks too.

Higher education franchising, where a university partners with another institution to deliver courses, can trace its roots back to the 1990s, but it has seen significant growth in the last few years. Since 2019/20, the number of students taught at franchised providers has doubled to over 130,000 in 2022/23 – equivalent to more than 5% of students in the sector ¹.

It's a model that can have benefits for all parties. As well as additional revenue for the university and the kudos of an academic brand for the external provider, it can also broaden access to education. By extending the reach of a university, a degree can becomes possible for someone who was deterred by the cost of accommodation or a mature student wishing to balance study around work and life.

Raising concerns

While many will benefit, there are some significant risks too. Last year, the Office for Students (OfS) raised concerns, flagging the potential risks to students and taxpayers as well as the reputation of universities ¹.

Among the cases reported to the OfS were staff managing partnerships being incentivised to prioritise recruitment and retention of students above course quality; students with very weak English language skills being told this was sufficient to join a course; and students paying to falsify English language tests to gain access to courses.

The I Paper ² has also raised concerns about some of the practices seen in the franchise sector. Earlier this year it reported on agents recruiting students on the basis that a student loan could pay for multiple foreign holidays. It also warned that up to 10 British universities were at risk of going bust due to their franchising activities.

Franchise risks

Recognising the risks associated with franchises and putting in place the necessary checks and governance to manage them effectively will help to ensure that the positives outweigh the negatives. These are some of the key risks:

Quality assurance and compliance risk
Whether a university is partnering with a UK or overseas institution, it’s essential that any programme offered meets the same education regulations and standards as those of the parent organisation. Putting appropriate checks in place will help to ensure the reputation of the university isn’t tarnished by lower standard qualifications.
Financial risk
As well as the uncertainty of a fluctuating revenue stream and the possibility of a partner going bust, which could potentially leave the university responsible for any students continuing education, there’s also a risk of fraud by the franchised delivery partner.

Student fraud is also a risk. In the 2022/23 academic year, a report by the National Audit Office ³ found that 53% of the £4.1m fraud identified by the Student Loans Company related to franchise provision, despite these students accounting for just 6.5% of all students with loans.
Legal and contractual risk
Franchise agreements must be carefully managed to ensure the university protects its brand. Understanding from the outset which organisation is responsible for which services, whether that’s the course content, intellectual property rights or student welfare and wellbeing, is essential. This also applies to insurance, where contractual obligations will determine who is liable and responsible for putting appropriate cover in place.
Operational risk
Universities also need to maintain close oversight and checks on how the franchise service is run. Stringent standards need to be in place for areas such as data protection and cyber risk, especially where the external partner is offering online courses. These operational checks should also ensure that sufficient insurance is in place, in line with contractual agreements.

Regulatory change

Concerns around franchising arrangements mean both the government and the OfS are keen to ensure the right balance is struck. Under government proposals, which were put out to consultation earlier this year, franchised delivery partners with 300 or more students would be required to register with the OfS. This, in theory, would ensure their courses meet rigorous quality standards in order to be eligible to access student finance.

The OfS has now taken this a step further. In July 2025, it proposed registration for any institution that has, or expects to have, 100 or more students on courses delivered through subcontracted arrangements in an academic year. It also proposes that universities should be required to publish details of their strategic rationale for entering into franchising arrangements and the proportion of student tuition fees they retain.

Change, and additional regulatory requirements, are certain. But, for universities keen to take advantage of the benefits that franchising delivers, having robust risk management processes in place will help to protect them, their students and the taxpayer.

More information

To discuss any of the issues raised in this article, please contact your Aon account manager or Richard Scott ([email protected])

Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues in over 120 countries provide our clients with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information and use sources that we consider to be reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

This article has been compiled using information available to us up to 01/09/2025.

Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Aon UK Limited is registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN. Tel: 020 7623 5500.