True, Challah is a "festive bread". But as Jews consider the Sabbath as a festival that occurs every week, it is also used at the two meals on the Sabbath.
Traditionally two loaves are used at each meal, to represent the extra piece of Manna that the Children of Israel had to collect on Fridays in the wilderness while going from Egypt to Israel. The Manna was provided daily, and had to be collected each day. However, as the laws don't permit carrying in public on the Sabbath, they had to collect a second piece on Friday. Hence two loaves of Challah at both Sabbath meals (Friday night and Saturday lunch).
Additionally, you will almost never find Orthodox Kosher Challah made with butter. This is because most Jews have meat for the Sabbath meals, and the dietary laws strictly prohibit having milk and meat foods together at the same meal. Of course, there's nothing to stop a Jewish vegetarian making Challah with butter at home, but no strictly Kosher bakeries will do this.