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The Atlas Model Railroad Company is a family owned business, founded in 1924 by Stephan Schaffan Sr. as the Atlas Tool Company serving as a general machine shop. Stephan Schaffan Sr. immigrated from Czechoslovakia around the turn of the century and brought his machine and toolmaking skills with him. In 1933, after graduating first in his class from Essex County Vocational School, Stephan Schaffan Jr. after joining his father in the business at age 16, was warmly welcomed into the business. Atlas Tool Company became a father and son team.

Steve Jr. built model airplanes as a hobby and frequented a local hobby shop. Being an enterprising young man, he would often ask the owner if there was anything he could do to earn some extra spending money. Tired of listening to his requests, the hobby-store owner threw some model railroad track parts his way and said, "Here, see if you can improve on this" and so the story begins.

In the early twentieth century, railroad modelers had to assemble and build everything from scratch. Steve Jr. created a "switch kit" which sold so well, that the entire family worked on them in the basement at night, while doing business as usual in the machine shop during the day.

Subsequently, Steve Schaffan Jr. engineered the stapling of rail to fiber track, along with inventing the first practical rail joiner and pre-assembled turnouts and flexible track. All of these products, and more, helped to popularize model railroading and assisted in the creation of a mass-market hobby. The budding Steve Jr. quickly outgrew the limitations of a basement and small garage operation. The Schaffan's soon realized they could actually make a living selling track and related products, Steve and his father had the first factory built in Hillside, New Jersey at 413 Florence Avenue in 1947. On September 30th, 1949, Atlas Tool Company Inc. was officially incorporated as a New Jersey company.