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Yup, that's what the OP's cousin should have done. But that's not going to help them now.

Read the OP again, shes had the business now for 4 months. from that the deal is done, Old lady ex-owner is a bit cheesed off though and wants to open a competition business close by.

Great advice, just tell her to get on with running her business and beating any competition. If it wasn't the old owner starting up, whats to stop others from doing the same thing? Business is all about competition.