Does factory reset remove any spyware installed on iPhone?

Unless the device is jailbroken, you cannot install spyware.

If it gives you peace of mind restore it as new.

Use iTunes to restore your iOS device to factory settings - Apple Support

Erasing the phone will remove it, restoring the backup may put it back.

If such software were available, you would have seen reports of the problem in the news.

Why do you suspect someone installed spyware?

Robert

I'm sorry, not sure why you were responding to me. I did not suspect this, I believe the OP did.

Tap Settings > General > Reset > Erase All Content and Settings.