How to reset/erase an iphone?

My sis just got me an iphone from a friend. Her friends stuff is still programed in the phone and i want to get rid of it. I went to settings then general and clicked reset then erase all contents/settings and varified erase iphone then it asked for her apple ID password for ***@rocketmail.com. I deleted what i could and replaced it with my stuff but how do I reset the phone completly without having her account password… I noticed a teeny tiny hole on the top of the phone is that a way to reset it at the service store?

Hold down the power button 4 times once restarting