rifteyy's solution is effective, but some background information may be helpful:
As Squashman notes, an if conditional either requires both sides to be either (double-)quoted or unquoted; that is, both if %option%==y ... and if "%option%"=="y" ... work:
The double-quoted form is more robust, as it also handles values with metacharacters such as & correctly, but the match must be exact with respect to presence or absence of spaces.
Conversely, only the unquoted form is forgiving of leading and trailing spaces; e.g. if %option%==y ... still works if the user entered y rather than just y.
You can use if's /I option to make the comparison case-insensitive, which obviates the need to check for y and Y separately, for instance. help if shows more information.
tree.com is a stand-alone executable that can be called from any (Windows) shell, so there is generally no good reason to call PowerShell (powershell.exe, which is expensive), given that you can invoke tree directly from your batch file - though you may need PowerShell to control the character encoding of the output files.[1]
As an aside: Inside PowerShell there is no need for Invoke-Expression (iex), which should generally be avoided; the best way to invoke an external executable such as tree.com fundamentally works the same as from cmd.exe (see below).
If you do need PowerShell, call it as follows, for instance:
powershell -command "tree > tree-folders.txt"
Therefore, a streamlined version of your batch file would look like this (cls commands omitted):
@echo off
cd /d "%~dp0"
:prompt
echo "Include files? [Y/N/Q]"
set /p option=
if /I "%option%"=="y" GOTO yes
if /I "%option%"=="n" GOTO no
if /I "%option%"=="q" GOTO :eof
goto prompt
:yes
tree /f > tree-files.txt
GOTO end
:no
tree > tree-folders.txt
GOTO end
:end
echo the tree list was created.
pause
As Stephan points out, the standard choice.exe utility offers a simpler prompting solution:
choice /c ynq /m "Include files?"
if %ERRORLEVEL% EQU 1 goto yes
if %ERRORLEVEL% EQU 2 goto no
goto :eof
choice.exe:
is case-insensitive by default (use /CS for case-sensitivity)
accepts only a single input character from the user, which instantly exits the prompt (no Enter keypress required), with the %ERRORLEVEL% variable set to the 1-based position of the character in the list of permitted characters passed to /C
- Note: The above deliberately uses, e.g.,
if %ERRORLEVEL% EQU 1 rather than if ERRORLEVEL 1, because the latter uses equal-or-greater logic, which would require you to reverse the order of the branching statements.
automatically validates the input (beeps if an invalid character is typed)
See choice /? for more information.
[1] However, you do need PowerShell if the command's output contains non-ASCII characters and you want the output redirection (>) to create UTF-16LE ("Unicode") files (Windows PowerShell) or (BOM-less) UTF-8 files (PowerShell (Core) v6+). Using > from cmd.exe results in OEM-encoded files, based on the console's code page, reported via chcp. Alternatively, you could switch the console code page to (BOM-less) UTF-8, via chcp 65001, but that wouldn't work with tree.com, because it is too old to support this code page. By contrast, it would work with the output from dir, for instance.
