diff --git a/libs/cmdio/io.go b/libs/cmdio/io.go
index c0e9e868a..0d7ba5da8 100644
--- a/libs/cmdio/io.go
+++ b/libs/cmdio/io.go
@@ -285,3 +285,13 @@ func fromContext(ctx context.Context) *cmdIO {
 	}
 	return io
 }
+
+func MockContext(ctx context.Context) context.Context {
+	return InContext(ctx, &cmdIO{
+		interactive:  false,
+		outputFormat: flags.OutputText,
+		in:           io.NopCloser(strings.NewReader("")),
+		out:          io.Discard,
+		err:          io.Discard,
+	})
+}
diff --git a/libs/template/resolve.go b/libs/template/resolver.go
similarity index 97%
rename from libs/template/resolve.go
rename to libs/template/resolver.go
index 2c3f021e2..8d1b26d8d 100644
--- a/libs/template/resolve.go
+++ b/libs/template/resolver.go
@@ -62,7 +62,6 @@ func (r Resolver) Resolve(ctx context.Context) (*Template, error) {
 
 	// User should not directly select "custom" and instead should provide the
 	// file path or the Git URL for the template directly.
-	// Custom is just for internal representation purposes.
 	if templateName == Custom {
 		return nil, ErrCustomSelected
 	}
diff --git a/libs/template/resolver_test.go b/libs/template/resolver_test.go
new file mode 100644
index 000000000..9fde4e9e9
--- /dev/null
+++ b/libs/template/resolver_test.go
@@ -0,0 +1,87 @@
+package template
+
+import (
+	"context"
+	"testing"
+
+	"github.com/databricks/cli/libs/cmdio"
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+)
+
+func TestTemplateResolverBothTagAndBranch(t *testing.T) {
+	r := Resolver{
+		Tag:    "tag",
+		Branch: "branch",
+	}
+
+	_, err := r.Resolve(context.Background())
+	assert.EqualError(t, err, "only one of --tag or --branch can be specified")
+}
+
+func TestTemplateResolverErrorsWhenPromptingIsNotSupported(t *testing.T) {
+	r := Resolver{}
+	ctx := cmdio.MockContext(context.Background())
+
+	_, err := r.Resolve(ctx)
+	assert.EqualError(t, err, "prompting is not supported. Please specify the path, name or URL of the template to use")
+}
+
+func TestTemplateResolverErrorWhenUserSelectsCustom(t *testing.T) {
+	r := Resolver{
+		TemplatePathOrUrl: "custom",
+	}
+
+	_, err := r.Resolve(context.Background())
+	assert.EqualError(t, err, "custom template selected")
+}
+
+func TestTemplateResolverForDefaultTemplates(t *testing.T) {
+	for _, name := range []string{
+		"default-python",
+		"default-sql",
+		"dbt-sql",
+	} {
+		r := Resolver{
+			TemplatePathOrUrl: name,
+		}
+
+		tmpl, err := r.Resolve(context.Background())
+		require.NoError(t, err)
+
+		assert.Equal(t, &builtinReader{name: name}, tmpl.Reader)
+		assert.IsType(t, &writerWithTelemetry{}, tmpl.Writer)
+	}
+
+	r := Resolver{
+		TemplatePathOrUrl: "mlops-stacks",
+		ConfigFile:        "/config/file",
+	}
+
+	tmpl, err := r.Resolve(context.Background())
+	require.NoError(t, err)
+
+	// Assert reader and writer configuration
+	assert.Equal(t, "https://github.com/databricks/mlops-stacks", tmpl.Reader.(*gitReader).gitUrl)
+	assert.Equal(t, "/config/file", tmpl.Writer.(*writerWithTelemetry).configPath)
+}
+
+func TestTemplateResolverForCustomTemplate(t *testing.T) {
+	r := Resolver{
+		TemplatePathOrUrl: "https://www.example.com/abc",
+		Tag:               "tag",
+		TemplateDir:       "/template/dir",
+		ConfigFile:        "/config/file",
+	}
+
+	tmpl, err := r.Resolve(context.Background())
+	require.NoError(t, err)
+
+	// Assert reader configuration
+	assert.Equal(t, "https://www.example.com/abc", tmpl.Reader.(*gitReader).gitUrl)
+	assert.Equal(t, "tag", tmpl.Reader.(*gitReader).ref)
+	assert.Equal(t, "/template/dir", tmpl.Reader.(*gitReader).templateDir)
+
+	// Assert writer configuration
+	assert.Equal(t, "/config/file", tmpl.Writer.(*defaultWriter).configPath)
+}
diff --git a/libs/template/template.go b/libs/template/template.go
index 46bdef57a..31c6e2814 100644
--- a/libs/template/template.go
+++ b/libs/template/template.go
@@ -27,7 +27,11 @@ const (
 	DbtSql        TemplateName = "dbt-sql"
 	MlopsStacks   TemplateName = "mlops-stacks"
 	DefaultPydabs TemplateName = "default-pydabs"
-	Custom        TemplateName = "custom"
+
+	// Custom represents any template that is not one of the above default
+	// templates. It's a catch for any custom templates that customers provide
+	// as a path or URL.
+	Custom TemplateName = "custom"
 )
 
 var allTemplates = []Template{
@@ -98,7 +102,7 @@ func options() []cmdio.Tuple {
 
 func SelectTemplate(ctx context.Context) (TemplateName, error) {
 	if !cmdio.IsPromptSupported(ctx) {
-		return "", fmt.Errorf("please specify a template")
+		return "", fmt.Errorf("prompting is not supported. Please specify the path, name or URL of the template to use")
 	}
 	description, err := cmdio.SelectOrdered(ctx, options(), "Template to use")
 	if err != nil {
diff --git a/libs/template/template_test.go b/libs/template/template_test.go
index 73d818dfe..cfcdd6251 100644
--- a/libs/template/template_test.go
+++ b/libs/template/template_test.go
@@ -45,3 +45,18 @@ func TestBundleInitRepoName(t *testing.T) {
 	assert.Equal(t, "invalid-url", repoName("invalid-url"))
 	assert.Equal(t, "www.github.com", repoName("https://www.github.com"))
 }
+
+func TestTemplateTelemetryIsCapturedForAllDefaultTemplates(t *testing.T) {
+	for _, tmpl := range allTemplates {
+		w := tmpl.Writer
+
+		if tmpl.name == Custom {
+			// Assert telemetry is not captured for user templates.
+			assert.IsType(t, &defaultWriter{}, w)
+		} else {
+			// Assert telemetry is captured for all other templates, i.e. templates
+			// owned by databricks.
+			assert.IsType(t, &writerWithTelemetry{}, w)
+		}
+	}
+}