Britain's most extensive college franchise operation has been heavily criticised by the Further Education Funding Council. But Handsworth College in Birmingham has hit back saying the inspection of its Community College Network was "fundamentally flawed" and premature.

Almost half of Handsworth's provision, covering more than 5,000 part-time students as far apart as London and Manchester, is in community venues, including what the inspectors called "many small or medium-sized terraced houses . . . some of which were cold, bleak and poorly lit".

FEFC inspectors added: "The teaching was poorly planned and used a limited range of teaching methods."

The network aims to attract students from ethnic communities under-represented in further education. The inspectors praised it as "an imaginative and innovative development which is particularly effective in meeting the needs of groups who do not normally enter further education".

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The college itself received a grade 1, the highest, for its responsiveness and range of provision. But the network got a 4, next to the bottom. Its low grade was issued after extra visits from the FEFC at the direction of Terry Melia, chief inspector.

"We are very disappointed with the report," said Peter Seazell, college marketing manager . "The disappointment is in the regrading that took place. The grades were presented to the governors in November in what we were told was the final form and all of a sudden, probably coincidentally with media stories around other colleges and franchising, we were reinspected."

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The reinspection resulted in lower grades for the network, for quality and for management.

But Mr Melia denied that media stories influenced the decision. He said: "I was not happy that the sample looked at reflected the community education provision. For example, there was work going on many miles distant from Birmingham and we had not looked at that."

Handsworth's franchising method is to invite classes already being held in the community to join the network, gaining the benefit of certificated courses, professional guidance and FEFC funding.