You will need to have advanced to chapter 2. First you need to go to Hector's House which will be marked on the map and collect the worm which will be on the right hand side of the screen under the window.
Then you need to head to the funfair. Go all the way to the right and speak with the race carnie. Name you worm and win the race. This is very easy, and will require you to tap
during the race to enable you to win. Quick and easy achievement.