Rainbow, could you maybe explain that you cannot have other businesses advertising or drumming up trade on your premises (do you ban other businesses? Would you allow the local plumber to advertise perhaps, or allow other parents to publicise their businesses? If not, it’s only fair to be consistent, right?)
Also, if it’s those diet supplement things then you could perhaps waffle about how your indemnity won’t cover them being offered to parents on the premises, eg because it’s basically like your business is endorsing the product contrary to your indemnity policy and/or because it’s a weight management product which has ingredients in which are not suitable for everyone?
If she gives you the ‘it’s all natural line’ then perhaps remind her that puffer fish are also all natural and organic. My FL not friend had terrible stomach problems, probably due to too much aloe consumption. Natural doesn’t mean ‘okay to eat’.
Good luck- and remember that it’s her being very cheeky here!