Give Away Apple Watvh

I am unable to successfully give away my Apple Watch Series 2 to friend. When we go through the setup with her phone it says that it's unable to complete the setup because the owner used "Find my iPhone" and to give it back to the previous owner to unlock it. As the previous owner, I am unable to unlock it. It has been removed from my Apple Devices. Should I re-set it to factory settings? What can I do if I can no longer find the Apple Watch 2 as one of my Apple Devices?