Because it always carried a red hood

Little Red Riding Hood, in Babelfish (French-to-English):

One day, his/her mother asked Small the red Hood to bring things to eat her grandmother. The small girl left immediately and it crossed the forest when a large wolf left behind a tree. It was very hungry and it wanted to know where the Little Red Riding Hood went with all these things to eat. The Little Red Riding Hood explained that it brought them in her grandmother.

(Via Gwenda.)

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