I agree with gopheliad's recommendation of El Corte Ingles.I used them both in Madrid and Barcelona. Wide variety of decent food at very reasonable prices.

They also serve "menu del dia" at the VIP´s restaurants during lunch time (which is later than US standards, starting around 1:30 pm until 4:00 pm or so). I think it is around 10 euros which includes a selection of first entrees (or first dishes), main course, and dessert.

Adios!

Also, maybe try going to a authentic Spanish market/grocery store! I remember it being quite the experience! For example: they handle all your fruit/veggies for you! (I was so confused!)
But it would be a great experience for the students to buy what the spanish buy!
They arn't as pricey as Corte Ingles, and all sorts of food!