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Site organization when targeting several locations

This is a followup on my previous question:

Site for the same service in different locations: how to avoid duplicate content?

I’m building a series of sites offering, say, cab services in different cities. Originally, the idea was to create a different domain for each city:

But that would require too much work in making each site different, lest Google penalizes us for duplicate content.
Thus, the next idea is to register a generic brand, say:

And then create subdomains targeting those cities:

My question would be: how effective would this second strategy be when ranking the site in each cities’ local searches? (we want to target specifically the “cab city2”, “cab city 3”, etc. keywords). Would we still have to make the effort to add “local content” to each of the subsites? Or would it be enough to have the city’s name in the H1 headline of each one and in the text body?

(One problem is that the company does not have local offices in each of those cities, so we can’t add local addresses).

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