I was also at Crate and Barrel that same weekend with my Mom and we came across these cute pink and brown donut dishtowels, and my Mom mentioned this would be the perfect towel to make the bag holder. I ended up buying a couple to also make as gifts. I was pretty sure Rick was going to freak out when I suggested we put a pink and brown donut bag holder in the kitchen, but he's a great sport. I may have also hung one of these cuties on the stove handle as well...I just loved it that much!!
I found a few websites explaining how to make one of these bag holders. I couldn't find the exact one we used because my Mom pulled it up on her Nook, but the instructions were similar to these here. We made one for my Mom as well...ok well Mom did most of the sewing, but I picked out the towels and supervised. AND it was my idea! :)
Basically you cut 2 pieces of elastic, each to be a little more than half the length of the top and bottom of your dish towel. You then stretch one piece across the top and pin it down, and then do the same to the bottom. You then sew the elastic onto the dish towel, we used a zig zag stitch to do this, and it will gather the top and bottom of the dish towel.
You then need to sew up the sides of the dish towel to make a tube. Just fold it in half length wise, placing the wrong sides together, and sew about a 1/4 inch seem. Then flip it inside out and you should have a tube with both the top and bottom gathered (like in my pic above). We just then took some ribbon and sewed a little loop at the top for a hanger, and then filled with a million plastic bags. It's great because you can just grab a bag from either the top or bottom, and it holds a ton of bags.