Rosaleen (Sarah Patterson) wears her red cape to visit Granny's house. Along the way she meets the Hunstman (Micha Bergese) who makes a bet with her on who will reach Granny's house first. He arrives first and eats Granny, though it's not actually seen. Rosaleen arrives later, and after some dialogue in which the Hunstman tries to seduce Rosaleen, she takes the shotgun and shoots him. Hunstman transforms into a wolf.
Rosaleen's parents are then seen arriving at Granny's house, and find that Rosaleen has turned into a wolf as well.
It's all very symbolic. Also, happened in a dream of the modern girl seen at the beginning of the film. It's not clearly explained.