I understand that if they don't perform to spec, any franchise operator can loose a franchise; it happened on the South East franchise that was back in Government hands for a while and actually did rather well under that regime by all reports.  There were significant factions who wanted it to remain under direct government control.

However, taking a franchise back is an extreme measure and (in the case of a franchise that promises to pay a billion pound to the treasury) an expensive one. There may be an extreme case coming up very soon on GNER with Sea Containers, the parent company, on the verge of bancrupcy. I would be suprised to see such an extreme situation occur in the near future with FGW.  Since they're required to run for 10 years, already with the oldest fleet in the country, with little spare stock,  and without replacing it, I expect they'll be forgiven a lot of breakdowns, short trains, cancellations, etc.