Colleges were warned not to claim funding for work which should be carried out by employers. Examples in the Further Education Funding Council guidance include teaching supermarket check-out staff to use a till and trainees being supervised by their boss.
The guidelines are designed to clarify what parts of work-based training schemes are funded with public money and what must be paid for by employers.
Julian Gravatt, of Lewisham College, who is conducting extensive research into franchise arrangements said they highlighted potential problems for colleges carrying out on-the-job training with private firms.
He said: "Franchising exposes the limits of what is acceptable.
"Something like training supermarket staff to use a till is the responsibility of employers. But what colleges use public funds to finance is down to the approach of the college to achieving its aims.
"That's an extreme example, but the issues are not necessarily black and white. It comes down to how a college thinks it should use public money to achieve its objectives."
Collaboration between colleges and companies is credited with producing a training revolution at firms like Tesco, which has a national training deal with Halton College in Cheshire, one of the leaders in franchise arrangements.
Principals expressed concern at proposals to set up a sliding scale for workplace national vocational qualifications laying out payments to colleges based on how much they and employers contribute to on-the-job training.
But some aspects of franchise deals have raised problems before. In October, the FEFC singled out diving courses for criticism, questioning whether such courses were appropriate for government funding.
Martin Jenkins, principal of Halton College, said there was a clear distinction between what was acceptable publicly funded training and what was not.
He said: "If something is part of a national qualification then as far as I'm concerned the small amount of pump-priming money from government sources is no different to day-release training.
"If it's linked to just the organisation's training needs and not a national qualification, that's full cost work and should not be funded from the public purse.
"I hope over time that we can clarify some of the grey areas without it becoming too bureaucratic for work-based programmes."