Fifteen years ago my family purchased a franchise. Within five years we realized the books were cooked and the clientele we purchased was not there. We went to court and lost (in my eyes) and closed the business down but kept the equipment since we paid for it. I have stayed in the same field for years and I have the drive to start over again without a franchise but I am unsure how to go about the second time financially. It has been a dream to one day open up again. I also went back to school and achieved two degrees in my field in hopes it would help. However, how do I financially go about doing it? I would start-up from home but a store front is always a plus. If I tried to get a loan I would certainly see a red flag from banks and possible investors since my family owned one before and we went out of business. How do I setup a portfolio or business plan? Do I include this hump when looking investors?
I think it is not a shame to went out of business in the past. Actually I would mention this when you discuss your plans, but speak of it a bit better than you do now. Actually you have much to tell. Just make sure you have answers to the questions like "why did you went out of business?", "why didn't you recognize there were no customers before you went into the franchise?" and so on. I guess you have made a post-mortem analysis. What is there is what you have learned of it. You most likely will make it better this time.
Personally I think there is no guarantee for having success in business, even with a great product. There are many things which can fail. After all you need a portion of "luck".
That said, I would not think you are getting a red flag from banks immediately. After all, you have paid them everything back. So you are a good customer. You have learned and if you need a credit which is possible to pay back, even when you get out of business again, it might be no problem.
On your business: personally I would start small and try to stay as small as possible. A store front might make some sense; but only if you know there are customers. Ask yourself the question: are there enough? Are there only enough when I have the storefront?
I have a friend who sells Cider in my country. English cider is not very well known where I live. Storefronts are a plus in this case, but he decided to start with e-commerce. Now he sees people are buying it, but he needs to grow popularity in germany as it is not enough to pay the rent for the storefront. He continues with the storefront and earns money which he invests in advertisement. One day - i am sure - he will invest in a storefront. But for now he could try out the business without too much risk. I mean, even when he suddenly gets out of business the cider is not lost. His friends (including me) will surely help him to get the cider out of his cellar.
Jokes aside; if you have a chance to start at home go with that first. If you need more after a while, get more. But start small, thats my advise. When you have reliable numbers it will be easier to get a loan, if you really need it.
Not sure on your actually business, but maybe this writing helps you a bit: http://theleanstartup.com/