I wash all of my fabric, no softener, iron, fold and put in respective drawers. That way, it is ready to pull out and start working with.
Flannel is no exception. It will shrink everytime, especially the cheaper ones. Better flannels aren't as bad, but will still shrink. Flannel is one of my favorite fabrics. The better teh fabric, the more soft and cuddly. Great for jammies, too.
In fact, the last two kits I have purchased from my LQS say to wash otherwise you will end up short and disappointed. In fact, I just washed some flannel today from Lyndhurst Studio by Janet Orfini. It is called 'Covenant Garden Trellis' and will be ironing it shortly.
Hope this helps.