This isn't good advice. The locally owned ones are often even more desperate and willing to go the extra mile to defraud you. The idea that small businesses are more honest than big ones is a complete myth. Most of the time it is the reverse: big corporations have more to lose.
Unfortunately, as much as I hate the middle ground fallacy, it is correct here. It's far too broad to say that locally owned ones are more likely to defraud you or less likely. The real truth about locally-owned establishments is that with big corporations you know exactly what you are getting because it is the same everywhere whereas individual local establishments will depend on who the owner is. If the owner is desperate and willing to do everything to defraud you, so will be the establishment. If the owner is the nicest person in the world they'll be perfectly happy running a business in the red for as long as they can avoid total financial ruin so that they can better serve their customers. And, of course, you'll get everything in between.
The advice to go local is less about it being a guaranteed win and more about it being how you find those who will go above and beyond everything.
Your description is accurate but the advice to go local is usually not given that way, it's usually given as a slogan.
I've actually never heard anyone say "The advice to go local is less about it being a guaranteed win and more about it being how you find those who will go above and beyond everything."
Instead I always hear a dogmatic something like "support local business! Big corporations are evil!" When I've actually been defrauded out of FAR FAR FAR FAR more money by buying local.
This isn't good advice. The locally owned ones are often even more desperate and willing to go the extra mile to defraud you. The idea that small businesses are more honest than big ones is a complete myth. Most of the time it is the reverse: big corporations have more to lose.