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Sew along the dotted black line with a small machine stitch (or slightly inside it, if you would like a longer fringed edge). Cut out each napkin in the magenta alley between the designs and pull out the threads beyond the stitching, so the edge becomes a fringe. To use as a napkin, fold the design into quarters. To use as a place mat, don't fold it at all. Use it flat.
Kona is the recommended fabric for this kit because it creates fringes at its edges even when you didn't want any. It will make a fine and fluffy fringe for you.