A source told ET on Friday that being pulled from the cover was a major "kick to the gut" for Franco.
"He was supposed to be on this cover with all these Hollywood icons," the source explained. "It’s a very momentous moment. Opportunities like this don't come around often."
"The cover was shot months ago, but I don't know when they decided to remove him," the source added. "James knew he was being cut as soon as the story [about his inappropriate behavior] broke. He'd been bracing for the fallout."
In a statement to ET, Vanity Fair revealed why they decided to edit the 39-year-old actor out of the issue. "We made a decision not to include James Franco on the Hollywood cover once we learned of the misconduct allegations against him," the outlet explained in the statement.
Aside from being removed from the cover, Franco was also snubbed out of a Best Actor Oscar nomination for his portrayal of Tommy Wiseau in The Disaster Artist earlier this month. A source tells ET that Franco, who had been a front-runner and already won Best Actor in a Musical or Comedy at this year's Golden Globes, is not doing well.
"The story has gotten away from him," the source explained, adding that Franco felt like he was "on top of the world" leading up to awards season. "He hoped that by keeping quiet, this would blow over. But even with industry friends coming to his side, things are spiraling downward."
"He was really being recognized as a force in Hollywood and then it came to an abrupt halt," the source continued. "His friends think he'll bounce back from this because he really is looking inward and trying to learn and be better. It just depends on if the public will forgive him. He's just really in a dark place right now."
As ET previously reported, an article in the Los Angeles Times was published on Jan. 11, detailing the accounts of five women accusing Franco of abuse of power and inappropriate behavior. However, a source close to Franco disputes that number, adding that the accusations against the actor are "false." Franco also denied allegations during appearances on The Late Show With Stephen Colbert and Late Night With Seth Meyers.
An additional source told ET earlier this month that Franco's friends are "really worried" about his well-being at the moment.
"He's not in a good place," the source said at the time. "They're watching him around the clock. He's really struggling."