Jason, please post a pic. I would like to see if we can figure out what's going on. But in the interm, here are some things that can cause problems.
I'm thinking it is a combination of things.
1. improper punching - too many stitches?
2. improper hooping - too tight?
3. wrong backing - not enough, too much or wrong type?
Some people don't hoop garments with the backing. They spray glue backing on or use sticky backing and put it on after hooping.
I myself use a little spray glue on a piece of backing and put it on the garment first, then hoop making sure that it is not too tight. Use as small of a hoop you can get away with, without hitting it while sewing.Too big of a hoop can just make things worse.
I try to keep the density down, otherwise no matter what you do, the design will pucker.
Backing can make a difference as well. Most backings are polyester but some are cotton. If that is being used would it not make sense that it would shrink more than poly when washed? Sometimes extra layers are required, but too many and it makes the design cup.
And most people don't follow washing instructions! Even poly will shrink somewhat if it is washed in hot water.
One last thing, not all thread is created equal. But that's another thread.......
