This is the 348th most frequent Czech word.
místní
"Local."
In this sentence, 'místní' functions as an adjective modifying the noun 'lidé' (people) to specify that the people being referred to are local.
Místní lidé jsou velmi přátelští.
The local people are very friendly.
In this case, 'místních' serves as an adjective in its genitive form, modifying the understood noun for residents/people, meaning it relates to the locals who patronize the shop.
Je to oblíbený obchod místních.
It is a favorite shop of the locals.
Here, 'místní' is used as an adjective describing the noun 'restauraci' (restaurant), indicating that the restaurant is part of the local area.