Thanks for getting in touch! You can either put the quotes into the variable value (i.e. the value would be "Test Service"), or in the sc.exe command itself (which would need to look something like DisplayName= '"$ServiceDisplayName"'). This change to the command can be done in the source code of the step itself in your web portal under Library > Step Templates > [Step Template Name]. If you’re editing the community step template itself (not a copy of it), you would then need to make a copy and then add that copied step into your project.
I hope this helps! Let me know how you go or if you have any questions or concerns moving forward.