I’ll say two things: Mike is being very polite in his piece and I root for entrepreneurs. It’s very hard to start an online business, let alone one in the fragmented, crazy local space.
That said, and while this low-cost franchise model looks good “on paper,” the strategy is flawed and probably needs to be changed. First, building the channel itself is extremely hard (though not impossible). ReachLocal tried something vaguely similar at the outset in trying to build a feet-on-the street sales force and found it very hard. (After working with partners, the company has gone back to building one again.) The people you attract as salespeople are of very uneven quality.
Second, the two sites that Mini-Cities is showing have a perfunctory feel and are unlikely to rank in search results (SEO) or compete effectively against so many local destinations. The statement “no one’s really gotten local right yet” may be true as a practical matter but it doesn’t mean that all competitors stand an equal chance of success.
The suburban strategy is interesting but ultimately won’t really be meaningful if the destinations don’t have more meat on their bones.
I think the only real chance here is to turn this business into a local sales channel for existing distribution (packages of clicks/calls/leads). Mini-Cities can have its local sites as an additional source of traffic but if it doesn’t also aggregate traffic from established sites (a la simplified SEM) it’s going to fail.
The time is now to make those adjustments.