Hello There!
Good questions you've asked here. My standard advice for multi-location business models is that you have:
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A page for every location
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A page for every service or product you offer
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Links from #1 to #2
What you're describing here, of creating a whole set of city-optimized versions of each service you offer even though the service is identical across all locations, is an option I don't particularly advocate. You could go this route, but here are some problems I see with this approach:
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I have 10 services and my business expands to 100 locations. What a mess it would be to have to create unique content for 1,000 city-optimized service pages that are all actually saying the same thing. It's just not going to be sustainable for most businesses to do this.
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I can't really say to myself that I'm creating these page for people. I'd feel I was doing it all for search engines, and (like Google) I don't really feel comfortable with that approach to marketing. My customer can be served just fine if my landing page for city 1 links to my page for service 1. If the service is the same for all customers at all locations, the only reason I'd create thousands of iterations of combinations of service+city would be for search engines.
So, rather than take this approach, I'd invest the time/money in something else. I'd go with a page for every city and a page for every service and put my budget towards content development and link building for these pages. I'd focus on building the overall authority of my brand in relationship to my topics, because I feel this would result in better ROI than creating a sort of octopus of near-duplicate pages solely in hopes of rankings.
Hope these thoughts are helpful in creating strategy!