First, old dogs are sensitive about their bodies. My advice is to get her checked up with a vet now. The dog could be in advance stages of arthritis and or thyroid problems, both of which can lead to snappiness. After a health clearance and blood tests, you'll need to work on bumping the Shih Tzu down the pecking order. In order to do this, you'll need to introduce "NILIF"- Nothing In Life Is Free. Here's a greyt link:
http://k9deb.com/nilif.htm

After that, you must teach the owner of the Shih Tzu the proper way to handle her elderly dog. Like I said, elderly dogs are sensitive about their bodies. Thus, you need to treat them with a gentler hand. Think iron fist in a velvet glove I have a few questions for the Shih Tzu owner.

In the first event, when the lady was checking out what was going on with the Shih Tzu and candy, did she reach into the Shih Tzu's mouth? Or did she place her hand over/across the dog's head?

In the second event, when the lady wanted to move the Shih Tzu, did she make a sudden movement when the dog was groggy and sleepy?

You should invite the Shih Tzu's owner to read this or print it out for her Wish you luck!