Molly, this is a fairly common challenge, which can indeed seem tough to sort out. You just need to tell CFB what URL it should use to browse that folder (or a folder it's within).
Briefly, that's about defining a "url prefix" for your "server". Edit the "server" that the project is linked to, and go to the "URL Prefix" tab there then click "add new", naming first the path to the folder for your project then the url to be used to browse that folder. Hit "add" to save that link, and then hit "finish" to save the server definition. Then try the "Run as ColdFusion Application" feature again.
Note this would not be necessary if your project WAS in the webroot of the defined server (or what's defined in the "Local Server Settings" tab when editing the "server" as the "document root", assuming the server is indeed defined to be a "local" one).
A challenge is that there are not only these many moving parts in CFB, from defining a "project" (and a "workspace"), to defining a "server", then linking the project to the server, which are themselves not so obvious. But then also different people can have a wide range of setups (with the CF "server" being a "local" or "remote" one), which can mean that finding the right solution for a given problem can be tough.
(And plenty about CFB can be confusing, as it's still new to so many. It also carries over some notions from the old Eclipse-based CFB. Then add to it the fact that CF is a web app server, which requires this wiring of the IDE to the server--which is of course not needed for most programming languages that VSCode supports.)
That said, this "url prefix" feature is indeed documented, as is the "server" feature (and "the projects" feature, and so on). Still, it's understandable that one might not have thought to look at it/for it. And even then the discussion there does not so clearly present itself as the solution to your challenge. Anyway, see the CFBuilder for VSCode docs on the "Server" feature, and within that see the section, "URL prefix tab".
Let us know if that gets you going. To be clear, getting this working also then opens the door to using the debugger feature: people who never get the debugger working often haven't noticed they first can't get that browse capability (Run as CF App) working.