ElektroStudios answer is a bit misleading.
"when you launch a bat file the working dir is the dir where it was launched" This is true if the user clicks on the batch file in the explorer.
However, if the script is called from another script using the CALL command, the current working directory does not change.
Thus, inside your script, it is better to use %~dp0subfolder\file1.txt
Please also note that %~dp0 will end with a backslash when the current script is not in the current working directory. Thus, if you need the directory name without a trailing backslash, you could use something like
call :GET_THIS_DIR
echo I am here: %THIS_DIR%
goto :EOF
:GET_THIS_DIR
pushd %~dp0
set THIS_DIR=%CD%
popd
goto :EOF