That's a load of bull.
OP can't start his business because he can't hire cheap foreign labor. Foreign students don't get income. OP doesn't have a product and OP doesn't have a company. OP also doesn't spend money because OP has 0 income to spend at said neighborhood restaurant, leaving them with 1 (at least) less client.
OP makes a product people buy. Foreign students get income. OP gets income. People get something that didn't exist before that (at least to them) improves their lives. OP (and possibly any employees he/she hires locally for more complex work) then has money to spend at neighborhood restaurant.
In every single way scenario B is better. It's also the reason economists tell you that economics is not a zero-sum game. And it's what the "but the furrennrrr" wharbble people don't get.