I don't know, I feel like unlike Frozen, which basically has a few main characters all of whom are separate from each other, so the musical had to do a lot of padding, Encanto's cast is all right there in the town, and many of them had at least one good song each, I could easily see them all getting a second song, making a big musical production number out of the reveal at the dining room table, going further into the grandmother story, etc. There's plenty of moments ripe to expand.
Lest not forget, Lin's first big show, In The Heights, really didn't have a central conflict either. But it pulled off being a "fairy tale" of their neighborhood, so I can easily see something similar happening again should they try to bring Encanto to the stage.
"Hey little girls, look at all the men in shiny shirts and no wives!" - Jackie Hoffman, Xanadu, 19 Feb 2008