Grandma set up in French city (6)
I believe the answer is:
nantes
'french city' is the definition.
(Nantes is a city in France)
'grandma set up in' is the wordplay.
'grandma' becomes 'nan' (nan can informally mean a grandmother).
'up' indicates anagramming the letters (letters get chucked up).
'in' means one lot of letters goes inside another.
'set' is an anagram of 'tes'.
'nan' inserted into 'tes' is 'NANTES'.
(Other definitions for nantes that I've seen before include "Loire port; an old Edict" , "City and port of W. France on the Loire" , "Western French port" , "port abroad" , "Site of historic drownings" .)