Flannel can shrink several inches a yard......
what batting are you going to be using and how are you going to quilt it....I personally would use warm and natural an all cotton batting, I would quilt it kinda close with a stippling.....and see what happens. It will shrink, it will get puckery (?) just like a rag quilt does. When I make my rag quilts I do not wash the flannel ahead of time, it does pucker, but that is the character of flannel. I do not think that a 40" square quilt will shrink more than a inch or two at the most, and I feel that the quilting will control this to a large degree.....
Flannel is flannel it is its our character, which is why we use it. Would strongly suggest washing after quilt is finished and using a color catcher if you have used any runny colors, especially red.