Horror franchises are difficult to get right, and it's a built-in problem that seems hard to avoid. Much of what works on us in a great horror movie is fear of the unknown, dread that the filmmaker carefully cultivates. When you end up making a sequel to a horror film, you are automatically dealing with a known quantity, and the more often you return to a movie monster, the more you familiarize it to the audience, and the less effective it becomes.
At this point, I have a hard time imagining anyone being afraid of Freddy Kruger, and if you look at the way they handled him over the run of the film series, the solution that the filmmakers embraced was to make him more and more comedy-driven, robbing him of whatever ability to scare he had in his initial appearance. It's happened with plenty of characters over time.