Principals of 21 colleges dubbed the FE21 group - including some of the most active franchisers - are angry at research by Lewisham College registrar Julian Gravatt.
His paper claims franchising has diverted cash from areas of greatest need, and attacks workplace and leisure training and franchise work carried out far from colleges' catchments.
But FE21 group chairman Mike Bourke, principal of Waltham Forest College, branded the research "fundamentally flawed" and called for the report to be withdrawn. He said several colleges named in the report were considering taking legal advice.
The report comes at a highly sensitive time as both workplace training and long-distance deals come under intense scrutiny from the Government's new working group on franchises.
Lewisham principal Ruth Silver said many principals had praised the paper. "Colleges have done nothing wrong. In these times of tight resources this paper is arguing for priorities and practical guidance."