Colleges are crying out for guidance in the wake of the Handsworth College report. Alison Utley reports

"The rapid growth has taxed the college's ability to manage and control the effective delivery and quality of the work it has undertaken through this franchised provision."

So concluded the inspectors whose report on Handsworth College rocked the further education world last month. Franchising of college courses to other colleges or to schools, employers or private training agencies is a brand new activity and one which colleges are finding irresistible. It is growing at a rate of knots. As Roy Bailey, principal of Tynemouth College, puts it: "Franchising is flavour of the month. Why? Because it is a way of making more units, and units are everything."

Mr Bailey is not alone in sounding a note of caution. "A framework is needed - and quickly - before matters get out of control. For those who find the biggest loophole (in the funding mechanism) make the most money."

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Mr Bailey is a member of a new working group set up by the Further Education Funding Council to prepare guidance and set out principles of best practice. The group, meeting for the first time next month, will identify the main areas of franchising activity and recommend to the FEFC which types of practice are acceptable.

Such guidance is crucial, say colleges, many of which have built up several years of experience from being on the other side of the fence to the franchisee. Few published rules govern franchising in FE and many colleges say they suspect widespread sharp practice as lucrative deals are made.

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Sir William Stubbs, chief executive of the FEFC, warned principals at their annual conference in November that some activities offering commercial advantage should be left well alone and certain aspects of franchising left open opportunities for malpractice. "Reliance on the market to sort out the efficient from the inefficient exclude the concept of mutual responsibility," he said.

Handsworth was not alone in attracting criticism of its franchise operation. Earlier this year. Bournville College in the West Midlands saw its community network collapse when it discovered that almost 90 per cent of scheduled classes in partnership with Muslim groups were not running.

A significant number of colleges say they have been taken aback lately by the number of approaches received from private training organisations keen to get into franchising partnerships now that much of the TEC backing has dried up. Most colleges say they are considering these approaches "with interest". The FEFC wants to avoid double funding of existing provision or the displacement of current public funding from a source other than the council.

A spokeswoman stressed that the council was neutral on the issue of franchising, which was a legitimate way of widening participation. There was strong interest from colleges in the practice, which was a useful means of getting over difficulties, such as lack of space for expansion on some existing college sites, she said.

Colleges, concerned that much of the reported growth in the FE sector consists of franchised students, have called for guidance. Vince Hall, principal of Dewsbury College and another member of the working group, said that many franchise students were not "real students through the door".

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Colleges were in a quandary, he said, because all were fearful of becoming too dependent on FEFC funding. Opportunities for diversifying income sources were welcome.

Yet many principals felt unsure about whether they would be breaking the rules if they entered in to franchising arrangements. "On the one hand we are told to be enterprising but then told to be careful and to 'remember Handsworth'."

Mr Hall also noted that some colleges were moving into franchising as a way of getting around the new contracts dispute. "If staff have not signed new contracts then it is easy enough to do a deal with a trainer to deliver the course instead."

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Di Fuller of Cambridge Regional College, also a member of the working group, stressed the importance of data accuracy when setting up franchising arrangements.

As much as 10 per cent of Cambridge's FTEs are franchised through a network of 18 community colleges over a 50-mile radius.

Much of the region is rural with very patchy resources, and franchising offered the chance to broaden provision.

"We need a handbook of good practice because the correct procedures have not been spelt out," Ms Fuller said.

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And then there was the issue of franchising programmes directly with employers. Should the funding council be paying for these students? These and other questions are still waiting to be answered.