Your structure is unlikely to lead to any penalties from search engines. The number of low quality pages is small compared to the number of (presumably higher quality) shop pages.
You should work on improving the quality of these pages so that they can be useful to anybody who visits for more than just navigation. For example if I am looking for an overview of all the shops in a town, I might want to know things like:
- Which ones are popular?
- Which ones have the best reputation?
This structure will get all your content crawled by search engines. As such it is great for content discovery purposes. However, it is unlikely to get your content ranked very well. When your important content is four clicks away from your home page, search engines will not assign much value (in terms of link juice and PageRank) to it. You need to find ways to get your content interlinked better:
- Link to some of the most import ant towns directly from the home page
- Link each shop to other related shops:
- in the same town
- same chain
- same business type