American Apparel

American Apparel's two bankruptcies (2015, 2016) and liquidation demonstrated how founder-dependent companies can collapse when founders become liabilities. Dov Charney built American Apparel on provocative advertising, Los Angeles manufacturing, and a sweatshop-free ethos. But his personal conduct led to termination, and the company couldn't survive without him—or with him. The mechanism failure was founder centrality creating fragility. Charney was American Apparel's creative engine, operational leader, and brand identity. When sexual harassment allegations led to his firing, the company lost its differentiation without losing its cost structure. LA manufacturing was expensive; provocative marketing was Charney's skill, not the institution's. The company tried conventional approaches that negated its differentiation. Post-Charney American Apparel was an expensive basics brand competing against H&M and Uniqlo—a position guaranteed to fail. The second bankruptcy led to asset sale to Gildan Activewear, which operates American Apparel as an online-only brand without LA manufacturing or provocative marketing. The original company's identity couldn't survive its founder's departure, demonstrating how personal brand and company brand can become dangerously intertwined.