Sorry but a total bash here~It probably was Petco! More than a few people here have had problems with Petco and Petsmart groomers.
It is very important that you start a good grooming experience. I too learned the hard way and took Pebbles to Petsmart for her first grooming.
I was CALLED back to the store to pick her up and the groomer wanted to "show me something". This is what I saw: Pebbles with a head collar/satellite dish around her head, attached to the table by her neck and this woman trying to RAKE a comb through her hair! The poor was scared to death and growling and snapping at this devil woman!!!!!
She then took her down and handed her back to me and gave me a 20 minute talk about how crazy she was and not to bring her back! I was in tears thinking I had the worst puppy ever
While I was going home that day I notice a grooming shop and stopped to see if they were open. The owner was there and let me in even though it was after hours and she was wonderful! I paid a little extra because they hand trimmed her and she wasn't perfect for the first time but it was worth it.
The last time I had here there Mary told me that she is one of the best dogs that comes in! 
My suggestion would be to work with Lily every day with treat and praise. Put her up on the kitchen table or dryer in your LR on a towel not on your lap but up like they do at the groomers. Touch her all over her body, her face, feet, tail etc. and praise her and give her treats. She will not like it at first but the treat will work. Then a little at a time start to brush/comb her. This will work, it worked for me for both Pebbles and now Doodlebug. Do it every day for just a few minutes and she will get use to the handling that is involved in grooming.
[QUOTE] I took him to Petco to be groomed when he was about 6 months old. They told me not to come back because he was incourageable!!!/QUOTE]
I would have called the store manager to let then know their employees are turning away paying customers. Unless your puppy viciously attacked the groomer there is no reason to turn away a PUPPY for grooming. They are there to service the customer whether it is you or your puppy. You are opening your wallet so they better respect you. Telling a paying customer to not come back in not appropriate or acceptable in my book.