If a player does not have three guests to discard, then they are unable to play Grandma’s Ability.
Once Grandma’s Ability has been played, lay the Grandma card in your Item cards. Grandma now counts as a Wildcard missing item (and no longer counts as a guest for the rest of the game).
Once Grandma has turned into a Wildcard missing Item, Grandma is immune to all powers and abilities.